nonprofit consulting zone blog

Don’t let this nonprofit negotiating tactic cost you money!

Don't let this nonprofit negotiating tactic cost you money!
 
If you've been in the nonprofit consulting for more than a month, I know you've heard it. It's the A#1 negotiating tactic for nonprofits, and it goes like this:
 
"Can you give us a nonprofit discount?"
 
"Aaaaah..." I can hear stalling as you think to yourself "What? That's money out of my pocket!"
 
Why do they ask?
 
To start with, nonprofits are unique in that most American government entities make them tax exempt. So they're already used to a "discount," of sorts, on a lot of goods and services that you and I or any business might pay tax on. Added to that, for the nonprofits who claim 501(3)3 status, which is most you'll run into, donors get a charitable gift deduction on their taxes for a donation. Why do the tax exemption and charitable donation occur? Because a nonprofit offers services (or goods) for the greater public benefit to anyone that needs them. (Yes, I know that this is somewhat debatable in certain circumstances, but let's go with it for this piece.) These three points are the building blocks for a culture of special treatment in pricing.
 
With that in mind, in the United States, nonprofits are one of the "favored" groups in the business discount pantheon. They're up there with seniors, veterans and the military. Some businesses offer a nonprofit discount as a way of showing their customers that they're "good guys." The hope is that this encourages more, full price business. In other words, its a marketing tactic.
 
So what's that have to do with you? It emboldens your nonprofit client to ask, if not expect, the same from you. The problem, what price would you discount from? As a consultant to nonprofits, all you work with is nonprofits!

Rationally, you have no incentive to do this. Any discount comes straight from your paycheck.

Emotionally, you may have an incentive. Is there mission something you care about?

As marketing, maybe there's a reason. If you treat this client better, will you get more business elsewhere? Be careful on this. You could just be rationalizing being made to feel guilty by your client. It's right up there with "think of all the visibility you'll get by working for us!" My guess is that you can't pay your electric bill with "visibility."

How about a charitable gift? This is a possibility, but be careful. Connecting it directly with your getting a contract could get you into legal issues. Check with your attorney and/or accountant to clarify this. I know nonprofit consultants who make charitable gifts to their clients for a lot of good reasons. However, they are not to the level that anyone would consider as a "discount" on services.

You could "fake it." In other words, offer a higher price, then show a "discount" that makes them feel like you did good for them, but just brings it to a price you regularly charge. This is, in my opinion, is disingenuous at best. Also, be warned: tempting though it may be, the difference between your "full" rate and your "discount" rate is not likely to be tax deductible  Like above, check this with your accountant or attorney. And for those who require state approved contracts, like fundraising consultants, you might want to check with your state's charity regulation agency on how to reflect any discount in your contract.

There's always a balancing act between your need to make money and your client expectations. Pricing is a very emotional topic for some clients. Go in with your eyes open.
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Published by

Matt Hugg

Matt's the president of Nonprofit.Courses. See his bio here.